Home price free-fall continues

Wednesday

Mar 26, 2008 at 12:01 AM

January saw steepest slip in home values in two decades.

By VINNEE TONG

NEW YORK — Home prices plunged by record levels in January from a year ago, with almost no major cities immune from the spiraling market. Analysts worried that even the usually reliable spring selling season would fall flat.

The closely watched Standard & Poor's/Case-Shiller index of home prices in 20 cities fell nearly 11 percent in January from a year earlier, the biggest drop in its two-decade history.

Prices were down about 20 percent in Las Vegas and Miami, both paying the price for especially rampant speculation and too much new construction during the housing boom. Fourteen other cities posted record declines in the Tuesday report.

The only bright spot was a 1.8 percent increase in Charlotte, N.C., where real estate agents say prices rose more modestly during the boom years and the regional economy is relatively strong.

"It's just a spiral that will end up taking this year to get out of," said Pava Leyrer, president of Heritage National Mortgage in Detroit, adding that the market there is not expected to improve until the spring of 2009.

In Las Vegas alone, nearly half the homes currently on the market have seen their prices reduced at least once, according to an analysis by ZipRealty, a discount real-estate firm.

Greg and Barbara Abbott have already cut the price twice on the two-bedroom condominium they are trying to sell on the Las Vegas strip. They're asking $669,900 now — and an offer in the $650,000 range means they'll lose money.

Abbott thinks hesitant buyers don't realize how reasonable the current price is. "They're not really being realistic about what the place is worth," he said.

There were already too many homes on the market, and foreclosures bring even more property — priced at a deep discount — into the mix. Zandi said while prices are still falling steeply, demand seems to have stabilized.

"The psychology of the market has completely shifted," Zandi said. "Sellers do realize that homes are worth fundamentally less than they thought."

Today, economists will watch a Commerce Department report on February new-home sales for any improvement in volume. Those figures are more forward-looking than existing-home sales.

Economists are already worried that the usually busy spring season could be in jeopardy.

"I wouldn't be looking for a pattern of improvement until April, May or June," said Brian Bethune, chief U.S. economist at Global Insight.

On Monday, new data for February showed the biggest drop in at least nine years in the median sales price of existing homes. Still, more homes were sold in February — 3 percent more, the first increase in seven months.

"Home prices continue to fall, decelerate and reach record lows across the nation," said David Blitzer, index committee chairman at S&P. "No markets seem to be completely immune from the housing crisis."

Prices have fallen month-to-month for five straight months in all 20 cities tracked by S&P. And the declines are getting steeper, with 13 of the 20 cities reporting their biggest single monthly decline in January.

The vast majority of homes in the U.S. are not in danger of foreclosure. But the housing slump has raised concerns about a recession and has had ripple effects across the economy.

A separate survey Tuesday from the Office of Federal Housing Enterprise Oversight said home prices fell 3 percent in January from the same month last year. That index is calculated using mortgages of $417,000 or less that are bought or backed by Fannie Mae or Freddie Mac.

With prices falling, more would-be buyers have decided to rent.

Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors in Miami, said three-quarters of all transactions in the past few months were for rentals and the rest were for home sales, a reversal of historical trends.

Abbott, the condo owner in Las Vegas, is asking a monthly rent of $2,300, down from the $3,500 he had originally wanted.

"It's empty at the moment," Abbott said. "We'd intended to rent it, but the timing, of course, was bad."

His broker, Bruce Hiatt of the Luxury Realty Group in Las Vegas, said there was no shortage of interested buyers — but none had decided to buy.